American expats and green card holders living abroad are responsible for filing us
Taxes on us citizens living abroad: Should American Expats file US
taxes if they live overseas?
As the old adage goes, only two things in life are certain: death and
taxes, especially for American citizens and those who possess green cards.
Unfortunately, the United States is one of the few countries left in the world that
Worldwide Taxation is Very Rare.
Most countries have a territorial tax system and only
In other words, if you’re an American citizen, or US green card holder living abroad, you’re required to file a federal tax return and pay
You may also have to file additional forms with your US federal tax return. For example, if you have foreign bank accounts that exceed $10,000 during the calendar year, you’ll have to file an FBAR (Foreign Bank and Financial Account) using the FinCEN Form 114.
Before I continue, I want to remind you that Annie André is not a certified financial advisor, and this article is not tax, legal or accounting advice. The information provided here is for informational purposes only and should not be relied on for tax, legal or accounting advice. Please consult a tax, legal and accounting advisors before engaging in any transaction.
Accidental Americans must also file a US tax return
You might be a US citizen and not even know it and still be required to file US
Americans who were born outside of the United States to a US citizen and have lived abroad all their lives never visited the US, or spent time in the US are also required to file US
These individuals are referred to as Accidental Americans.
For example, Fabien Lehagre is a French resident born in the US in 1984 but left in 1986 at the age of two.
In 2014, when Fabien was 30 years old, he received a letter from his French bank asking him for his American tax identification number (TIN). At first, Fabien thought there had been a mistake but discovered he had acquired US citizenship at birth. Therefore, he was obligated to declare his global income to the US Internal Revenue Service (IRS).
Soon after, Fabien established the Association of Accidental Americans to defend and represent the interests of EU citizens holding American nationality residing outside the United States against the harmful effects of the extraterritorial nature of the US law.
That’s the bad news.
Here’s the good news.
The good news is that most American citizens and green card holders living abroad can eliminate or reduce their US federal tax bill using special tax credits and exclusions that the IRS has put in place to help expats avoid double taxation.
The other piece of good news is that you only have to file a US tax return if you earned more than the minimum income threshold, aka the standard deduction. (see minimum income threshold section below).
The standard deduction is a specific dollar amount that reduces the amount of income on which you’re taxed.
What happens if you don’t file
taxes while living abroad?
If you’re a US citizen or green card holder living abroad and don’t file your US or state
You can receive a failure-to-file penalty of 5% of your unpaid
If you can’t pay your
However, if the IRS owes you money, the failure-to-file penalty usually doesn’t apply if you’re due a refund. Typically, you have three years to claim any refund owed to you from the IRS
So get moving and file your
What is the minimum income threshold for filing US
Federal law doesn’t require you to file a tax return if your worldwide income is below the standard deduction during the previous year.
If you are self-employed, the threshold is $400, regardless of filing status. Even if you don’t have to file because you earn below the threshold, you may want to file If you are eligible for certain credits and refunds . You may be subject to filing requirements as well if you owe a special tax.
If your worldwide income equals or exceeds the standard deduction, aka filing threshold income during the previous year (which varies by filing status), you must file US expat
- For example, for income earned in the 2022 tax year, which you use to file your 2023
taxes, the standard deduction is $12,950 for single filers and married filing separately, $25,900 for joint filers and $19,400 for the head of household. If your income is below these amounts, you do not have to file a US tax return.
The IRS published these tables in Publication 17 and Publication 501 and are updated each year.
The income thresholds quoted below apply to income earned in 2021 and 2022, which you use to file your 2022 and 2023 tax returns.
|FILING STATUS||AGE||GROSS INCOME
|65 or older||$14,250|
|Head of household||under 65||$18,800||$19,400|
|65 or older||$20,500|
|Married, filing jointly***||under 65 (both spouses)||$25,100||$25,900|
|65 or older (one spouse)||$26,450|
|65 or older (both spouses)||$27,800|
|Married, filing separately||any age||$12,190||$12,950|
|Qualifying widow(er)||under 65||$25,100|
|65 or older||$26,450|
- Wages/Salary from US and non-US sources
- Rental Income
The 7 tax brackets and rates for filing US
taxes in 2022
If you earn above the minimum worldwide income threshold and have to file your US
There are seven federal individual income tax brackets based on the progressive income tax system. In other words, the more income you earn, the more you pay.
Every year, the IRS adjusts tax brackets, usually by increasing them to keep up with annual inflation. That means you could end up in a different tax bracket from one year to the next
These are the Federal Income Tax Bracket rates for
Filing Joint Tax Returns
Filing Seperate Tax Returns
|Heads of Households|
|10%||$0 to $10,275||$0 to $20,550||$0 to $10,275||$0 to $14,650|
|12%||$10,275 to $41,775||$20,550 to $83,550||$10,275 to $41,775||$14,650 to $55,900|
|22%||$41,775 to $89,075||$83,550 to $178,150||$41,775 to $89,075||$55,900 to $89,050|
|24%||$89,075 to $170,050||$178,150 to $340,100||$89,075 to $170,050||$89,050 to $170,050|
|32%||$170,050 to $215,950||$340,100 to $431,900||$170,050 to $215,950||$170,050 to $215,950|
|35%||$215,950 to $539,900||$431,900 to $647,850||$215,950 to $539,900||$215,950 to $539,900|
|37%||$539,900 or more||$647,850 or more||Over $323,925||$539,900 or more|
How much foreign income can I exclude as taxable income on US
You’ll need to choose between the foreign income exclusion or the foreign tax credit. You can’ choose both, so you’ll need to choose wisely.
Americans filing from abroad can offset U.S. tax on foreign income if they’ve paid
This means that most Americans filing from abroad won’t owe any U.S. tax, but it depends on each individual’s circumstances.
- If you choose to exclude foreign earned income or foreign housing costs, you can’t take a foreign tax credit.
- If you claim the foreign income exclusion and then change back to the foreign tax credit, you can’t claim the exclusion again for five years. The only way to claim the exclusion again involves a costly process with the IRS.
FEIE (Foreign Earned Income Exclusion- form 2555)
Foreign Earned Income Exclusion allows you to exclude up to a certain amount of your foreign earned income from being taxed.
Foreign Earned Income Exclusion can only be applied to earned income, such as salaries, self-employment, wages, and commissions.
- If you’re living abroad off investment, passive income, rents, pensions, dividends, or interest, you don’t qualify for the FEIE.
- If you’re married and both meet either the residency test or the physical presence test, you can each claim the FEIE.
The maximum amount of income from employment or self-employment that overseas Americans can exempt from their U.S.
|Tax Year||FEIE Amount|
|2022 (filing year 2023)||$112,000|
|2021 (filing year 2022)||$108,700|
|2020 (filing year 2021)||$107,600|
|2019 (filing year 2020)||$105,900|
|2018 (filing year 2019)||$103,900|
|2017 (filing year 2018)||$102,100|
|2016 (filing year 2017)||$101,300|
|2015 (filing year 2016)||$100,800|
Foreign Housing Exclusion
If you’re an expat working as an employee with housing expenses like rent and utilities, you might be able to exclude or deduct them.
Foreign Tax Credit – form 1116
Claiming a foreign tax credit using form 1116 is a U.S. tax break that offsets income tax paid to other countries and can only be applied to foreign
You can take a foreign tax credit as long as you don’t take the Foreign earned income exclusion (FEIE) or the foreign housing exclusion.
You might be better off claiming the foreign tax credit if any of these apply:
- You pay foreign tax at a higher rate than your U.S. tax rate
- You want to participate in an individual retirement arrangement (IRA). If you exclude all of your income with the FEIE and have no other sources of earned income, you’re not eligible to contribute to an IRA.
- You qualify for certain family-related credits based on non-excluded income.
- You wish to exclude or reduce
taxeson passive or investment income
- You’ve retired abroad and only have investment and passive income.
Child tax credit is different for expats living abroad
Living or working outside the U.S. can add a twist to what you can claim for the child tax credit.
Normally, you can claim both the nonrefundable and refundable portions of the child tax credit. However, your eligibility can differ while living abroad depending on whether you claim the foreign tax credit or (FEIE) foreign earned income exclusion.
Expats with foreign real estate
If you own foreign residential property, the US tax system treats it the same as if it were US property.
- Mortgage interest and property
taxesare deductible on your US taxes.
- If the foreign-owned property is sold, any capital gains made are subject to US capital gains tax rules, the same as if it were in the US. For example, if the home is your primary residence, it may be eligible for an exclusion of up to $250,000 USD of the gain and $500,000 USD if married filing jointly.
Any foreign rental income expats earn with foreign properties is considered passive income and not earned income, so they cannot be excluded using the Foreign Earned Income Exclusion.
However, you can claim a foreign tax credit on your U.S. tax return for the income
Do I Need to File State
Taxes if I Live Abroad?
Most American expats and US residents living abroad can stop filing state
Some states, however, require you to continue to pay state
There are four states where getting out of paying state
You may be able to avoid paying state income
|4 Sticky States||10 States with
no income tax
|1) California||1) Alaska|
|2) South Carolina||2) Florida|
|3) New Mexico||3) Nevada|
|4) Virginia||4) New Hampshire|
|5) South Dakota|
|8) Washington State|
When do I have to file US
taxes if I live abroad?
Every Us tax filer knows that
However, American expats living abroad receive an automatic extension until June 15, which can be extended again to October.
Although you may not have to file until June 15 or October, you should pay any
You must file your
taxes to the IRS in US dollars.
Expats filing US
The IRS doesn’t have an official exchange rate, but you can use any reputable currency conversion source as long as the source you use is consistent.
If you have to keep track of a lot of transactions, I highly recommend using accounting software.
For instance, I use Quicken accounting software which allows me to keep track of my US-based bank accounts, income and expenses in US dollars, French accounts, Canadian accounts etc. Then when I run my reports for US tax purposes, it automatically converts everything to US dollars for me using a reputable change rate source.
If you are an American or US green-card holder living abroad, keep the following things in mind come tax season.
- You must file
taxesno matter where you live or work in the world if you earn above a certain threshold.
- US Expat filing deadline is (June 15th!).
Need help with filing U.S.
Contact taxesforexpats.com and get a $25 discount!
If you have any questions or need assistance filing your
I’ve also written a personal review of Taxes for expats accounting services here.